RBI circular on cryptocurrency will promote underground market

With Reserve Bank of India (RBI) banning crypto trading from 6 July 2018 in India, this has fueled growth of trading crypto currencies from underground markets.

Speaking at the International Blockchain Congress 2018 in Hyderabad on 4 August 2018 in a panel discussion on ‘Way Forward for India Cryptocurrency Exchanges’, an official from the Nishith Desai Associates law firm said that RBI circular only increased money laundering.

If you see steps taken by the government in the last few months has only shifted open market to underground.

When RBI issued a ban, many Indian exchanges has self opted for KYC, under which all the documents were verified before users started trading. so you are aware from where the money is coming and where it going, said another participant at IBC 2018.

But after the ban was enforced, things have started moving in the wrong direction and all concerns that the RBI has stated in the circular on 6 April 2018 like money laundering, consumer protection and market integrity have gone haywire, the participant added.

The law firm official said that in a cash market, there is a likelihood of minimal records and an unlikelihood of revealing revenue, as compared to banking channels with customer due diligence, where authorities can examine transactions which they can tax.

Uncoin co-founder Sathvik Swaminathan said while cryptocurrency exchanges use methods of verification such as unique identity number (Aadhaar) as address proof and others when dealing with transactions, it becomes difficult to verify whether cash used for these transactions is accounted for.

Some of the exchanges have a policy in which, if the user exceeds an ‘X’ amount of rupees, or Bitcoin, then they will want to have an additional set of verification documents so that they know that the person is a high value, high risk customer. You will know what they want to do, Swaminathan said.

Taking questions from the audience, panelists said cryptocurrency is not currency as per the definition of currency in India.

They said currency is restricted to bank notes, coins and promissory notes and opined cryptocurrency is not a derivative as well, adding that it is akin to goods such as gold or precious metals which behave more like assets.

Koinex co-founder Rahul Raj and Zebpay CEO Ajeet Khurana were the other panelist participating in the discussion.

The event saw participation of over 80 delegates addressing issues like application of Blockchain by Asia and India’s role in it, cryptocurrency exchanges, data privacy and security in the age of digital payments.

IBC witnessed close to 2,000 from across the globe participate in workshops and seminars organized by delegates from Tech Mahindra, IBM, Infosys, Accenture, Microsoft and Future Retail among others.

IBC is India’s first Blockchain conference held in Hyderabad form 3-4 August 2018 and is co hosted by Telangana and Goa state.

The second leg of the conference will be held in Goa on 5 August 2018.